Microsoft's fiscal 2Q to shed light on Windows 8

Microsoft's latest quarterly report could be hurt by lukewarm reception for Windows 8, Surface

Associated Press

SAN FRANCISCO (AP) -- Microsoft Corp.'s quarterly report for the final three months of last year is expected to give investors a better sense on how the latest version of its Windows operating system has been faring.

WHAT TO WATCH FOR: The fiscal second-quarter results, due out after the stock market closes Thursday, will be the first to include contributions from Windows 8, a dramatic overhaul of the computer operating system that has been the center of Microsoft's financial orbit for decades.

Windows 8 features a new look and feel that includes the ability to control applications with the touch of a finger on a computer screen. The versatility is supposed to make Windows 8 suitable for powering tablet computers and traditional personal computers, helping Microsoft adapt to market conditions as desktop and laptop machines become less popular.

The response to Windows 8 since its Oct. 26 release appears to have been lukewarm, at best. The software has been panned by many reviewers as too confusing, and none of the hundreds of different devices running on Windows 8 emerged as a hit during the holiday shopping season, despite a siege of Microsoft-financed advertising.

About 60 million copies of Windows 8 had been licensed through early January, according to Microsoft.

At the same time Windows 8 came out, Microsoft also released a tablet computer Surface that runs on a streamlined version of the operating system. BGC Financial analyst Colin Gillis estimates about 750,000 Surface devices were sold in the quarter, leaving it well behind Apple Inc.'s top-selling iPad, Google Inc.'s Nexus tablets and Amazon.com Inc.'s Kindle Fire.

Investors seem to have concluded that Windows 8 and Surface have not provided Microsoft with much of a lift. The company's stock is down by about 8 percent since Microsoft's last quarterly report in October. The Standard & Poor's 500 has gained 2 percent during the same period. Microsoft's stock ended last week at $27.25.

The conference call discussing the results for the quarter spanning from October through December will give management an opportunity to discuss the company's expectations for Windows 8 through the remainder of the year as more PC makers introduce machines running on the software. Microsoft is planning to release a more sophisticated version of its tablet, called Surface Pro, by the end of this month. Around the same time, Microsoft also will take the wraps of an update to its Office suite of programs that includes applications for work processing, spreadsheets, presentations and email.

Microsoft's best numbers for the quarter might be posted in its entertainment division, which is anchored by its Xbox 360 video game console.

WHY IT MATTERS: Microsoft remains the world's largest software company, and its stock is one of 30 in the closely watched Dow Jones industrial average.

WHAT'S EXPECTED: Analysts surveyed by FactSet expect Microsoft to earn 75 cents per share on revenue of $21.6 billion.

LAST YEAR'S QUARTER: The Redmond, Wash., company earned $6.6 billion, or 78 cents per share, on revenue of $20.9 billion at the same time in 2011.

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